Lithuania: New transfer pricing documentation rules in draft order

Lithuania: New transfer pricing documentation rules

The Ministry of Finance of Lithuania earlier in 2018 issued a draft order that to amend the existing rules that apply to controlled transactions—i.e., the transfer pricing rules. When finalized, the draft order would amend Order No. 1K-123 (9 April 2004).

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Among the measures in the draft order are the following:

Previously, the tax authorities on examining whether a controlled transaction price was consistent with the arm‘s length principle were able to use a database that was not accessible to taxpayers. The draft order would require the tax authorities to use the information provided by or made available to taxpayers.

The transfer pricing documentation would consist of Master and Local files for certain companies.

The Master file would be prepared by Lithuanian entities and by foreign entities that operate in Lithuania through a permanent establishment and that have income of more than €15 million during the tax period.

Previously, companies had to prepare a Local file if the company's income exceeded approximately €2.9 million. This threshold would be increased to €3 million under the draft order.

A taxpayer would be required to renew its Master file under the transfer pricing documentation rules every three years if all conditions of the controlled transaction remained unchanged.

A taxpayer would have to renew its benchmarking study with respect to a period complying with the requirements of the arm‘s length principle every three years, if the economic circumstances did not change significantly.

Data submitted in the documents relating to the controlled transaction would need to be updated each tax period.

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